Pharmacy Chain 36.6 COMPANY PROFILE. August 2008

Transcription

1 Pharmacy Chain 36.6 COMPANY PROFILE August

2 DISCLAIMER THIS DOCUMENT IS NOT AN ADVERTISEMENT OF SECURITIES IN THE RUSSIAN FEDERATION, AND IS NOT AN OFFER TO SELL, OR AN INVITATION TO MAKE OFFERS TO PURCHASE, ANY SECURITIES IN THE RUSSIAN FEDERATION. NOT FOR RELEASE, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA OR JAPAN. This document includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the fact that they do not only relate to historical or current events. Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, expected, plan, goal believe, or other words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond Company s control. As a result, actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements. Any forward-looking statements made by or on behalf of the Company speak only as at the date of this announcement. Save as required by any applicable laws or regulations, the Company undertakes no obligation publicly to release the results of any revisions to any forward-looking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of this document. The securities referred to herein have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States or to US persons unless the securities are registered under the Securities Act, or an exemption from the registration requirements of the Securities Act is available. No public offering of the securities will be made in the United States. This communication is being distributed only to and is directed only at (a) persons outside the United Kingdom, (b) persons who have professional experience in matters relating to investments, i.e., investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"), and (c) high net worth companies, unincorporated associations and other bodies to whom it may otherwise lawfully be communicated in accordance with Article 49 of the Order (all such persons together being referred to as "relevant persons"). The securities are available only to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be available only to or will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this communication or any of its contents. 2 2

3 36.6 AT A GLANCE Russia s largest pharmaceutical retailer, with a strong focus on regional growth #1 brand in the Russian health and beauty retail market National market share - 6.6% Moscow market share -10% First Russian pharmaceutical company to go public Market capitalization as of August 1, 2008: $304 mln Over 1,200 stores currently in operation Over 12,000 people employed Portfolio of attractive assets: OJSC «Veropharm» LLC «Kub-Market» (Early Learning Center) Closed-end property mutual fund $ mln Source: Company Number of stores Company s revenue CAGR = 43% Source: audited IFRS accounts 3 3

4 10 YEARS OF SUCCESS AND LEADERSHIP Leading Russian health & beauty and pharmaceutical retailer offering a variety of high-quality affordable goods founded strategy creation together with McKinsey & Co IPO RAPC founded first branded store opened in Moscow Shareholders structure Pharmacy Chain 36.6 Free float 36.6 Investments Ltd regional expansion start first branded store opened outside of Moscow is the first Russian company to become member of the US National Retail Federation Veropharm placement of RUR 3 bln bond issue IPO Veropharm exclusive franchise with Boots launch of the private label line introduction of the new ERP system SPO th pharmacy opened voted the Best consumer sector company in Russia for the 3rd year 47,5 % 43,8 % 48% 52% Management 8,7 % Free float Source: Company 4 4

5 COMPANY STRUCTURE PHARMACY CHAIN 36.6 (Retail) VEROPHARM (Pharmaceuticals production) EARLY LEARNING CENTER (Сhildren s goods) Business units (6) 5 5 Source: Company

6 6 I. Market overview

7 MACROECONOMIC FUNDAMENTALS Russian private sector economy is experiencing a robust growth fueled by the growth in real GDP and disposable income Source: Euromonitor $ bn 1, Growth of annual household spending and real GDP ($ bln) 7.3% 7.2% 5.1% % % 6.7% 7.8% Per-capita disposable income GDP growth Retail market turnover 79 CAGR = 22% Source: Euromonitor % 7% 6% 5% 4% 3% 2% 1% 0% 230 Retail sales and disposable income growth 2002=100 Source: Euromonitor Annual disposable income Retailing USA United Kingdom Source: Euromonitor GDP per capita in major countries France Germany Italy Greece Czech Republic Hungary Poland Russia Turkey Brazil 10,730 9,096 6,774 6,679 16,434 13,700 $ per capita 33,280 35,565 41,313 39,550 45,793 45,347

8 PHARMACEUTICAL RETAIL MARKET OVERVIEW Market size estimates ( , $ mln) СAGR 12% Leading Russian drugstore chains by turnover PC 36.6 Rigla Pharmacor Implosia Vita Dr Stoletov Sales, $ mln , audited results ,4 Hospital Retail FRP (DLO) Source: CMR «Pharmexpert» Growth of per-capita expenditure on pharmaceuticals in Russia ($ retail prices) Source: CMR «Pharmexpert» and company estimates Per-capita expenditure on pharmaceuticals (2007, $ retail prices) Source: CMR «Pharmexpert» Ukraine Belorussia Kazakhstan Russia Source: CMR «Pharmexpert» Turkey Czech Rep. Poland UK Italy Spain Germany France

9 II. CORE BUSINESS - RETAIL 9

10 REGIONAL PRESENCE Company reaches out to most Russian cities with a population over 500K people Number of stores (Q1 2008): Moscow-Central 386 including Northwest 29 South Urals 280 South 204 Volga 133 North Urals 115 West-Siberia Pharmacy chain 36.6 is among top 5 chains by store count at 22 Russia regions - Murmansksky region Sales breakdown* % 5% 15% 11% 3% 10% 12% 70% 27% 42% Moscow and Moscow Region Ivanovsky region Vladimirsky region Ryazansky region Nizhegorodsky region Lipetsky region -Belgorodsky region Kirovsky region Voronezhsky region Permsky krai Tatarstan Rostovsky region Krasnodarsky krai Samarsky region Sverdlovsky region Volgogradsky region Bashkortostan Orenburgsky region Tumensky region f - Astrakhanskiy region Omsky region Moscow Urals Volga North-west South West Siberia - (*) based on management accounts Source: Company Source: Pharmatsevtichesky Vestnik, #39 from Dec

11 NUMBER ONE BRAND RECOGNITION NATIONWIDE Consumer purchases Pharmacy Chain 36.6 has established one of the most successful and well recognized brands in the industry Company is ranked first in purchases (30.5%) among Russian retailers, signaling its nationwide recognition and consumer loyalty* Pharmacy Chain 36.6 Pyaterochka (X5) Kopeika Auchan Perekriostok (X5) Euroset Tsentrobuv 7th Continent Eldorado Arbat Prestige 30.5% 30.1% 30.0% 26.1% 24.9% 21.8% 21.2% 20.9% 20.6% 20.2% Source: TNS, respondents Brand awareness in comparison with industry peers Brand awareness in comparison with other retailers Pharmacy Chain 36.6 Stary Lekar Rigla Doctor Stoletov O3 Pharmacies 52% 61% 73% 72% 99% Pyaterochka (X5) Kopeika Auchan 7th Continent Pharmacy Chain 36.6 Perekriostok (X5) IKEA Eldorado GUM Ramstore 77.4% 76.5% 74.8% 70.7% 70.7% 70.6% 67.1% 65.2% 64.5% 62.9% Named first Named with help Named without help Source: TNS, respondents Source: A/R/M/I-Marketing data, Nov 2007, 517 respondents * according to TNS 11 11

12 PRODUCT DIFFERENTIATION 36.6 has launched new projects aimed to differentiate its product mix and obtain higher margins Nondrugs sales: 35% Sales breakdown, 2007 Optics (1%) Nutricional supplements (4%) Derma Cosmetics 7% 30% Parapharma 23% Vitamins (3%) OTC Cosmetics centers located in over 55 major pharmacies Exclusive offerings Eclipse, Monteil, Champneys implants etc 32% RX Source: Company 45% 40% 35% 30% Product gross margins 40% 30% 33% Boots brands 600 SKU s of Boots products are sold countrywide Optics 14 stores and 22 opticians departments 25% 20% 20% 15% 10% 5% 0% Moscow Regions Source: Company Rx & OTC drugs Non-drugs 12 12

13 CUSTOMER MANAGEMENT COMPETENCY Malina program in Moscow 30% of 36.6 sales in Moscow are made with MALINA card Average transaction with MALINA card is 2 times higher than a usual average check households which equals 43% of MALINA database are 36.6 clients ( 1 among MALINA members) points issued at 36.6 pharmacies since program launch Loyalty cards in the regions Special discounts for pensioners 13 13

14 PRIVATE LABEL Targeted level of private label sales 12% 10% 10% % of sales 8% 6% 4% 2% 0% 2 % F Source: Company Over 500 SKUs 83 manufacturers in 15 countries $ 13.7 mln sales volume in 2007 > 60% average gross margin Natura 36,6 and MED response 36,6 sales represent 7% of all cosmetics sales at 36.6, and occupy the 2nd place after Vichy, Russia s absolute leader in cosmetics sales 14 14

15 SUPPLY CHAIN OPTIMIZATION Supply chain optimization and centralized purchasing brought by the new distribution system will significantly increase the Company s profitability Distribution network coverage Launched in 2006 and expected to become fully operational by end of 2008 Focus on centralized purchasing Aimed to reduce logistics costs and improve gross margins Will allow 36.6 to: improve contractual terms with suppliers achieve higher margins in the regions ensure better private label penetration EBITDA margin effect % per year during Murmansk St.Petersburg Moscow N.Novgorod Rostov Kazan Volgograd Samara Saratov Krasnodar Orenburg Sochi Source: Company Kirov Perm Ekaterinburg Ufa Kemerovo Novosibirsk Omsk Logistics system implementation Supplier National DC Transportation RDC RDC RDC RDC Drugstore Аптека Drugstore Аптека Drugstore Аптека Drugstore Аптека Drugstore Аптека Source: Company

16 III. Non-core businesses 16

17 VEROPHARM The 4th largest Russian producer of pharmaceutical products with Company operates 3 production facilities in Financial highlights 7.1% market share in Russia: Belgorod (GMP line built in Dec. 01) Voronezh (#1 in Russia and Ukraine in adhesive bandages) Pokrov (#1 in oncology products with % market share among Russian producers) In April 2006, Company publicly offered - 49% of its shares with a listing on RTS Market cap has grown 78%, from $280 Source: audited IFRS accounts, 2007 unaudited IRFS accounts mln to $500 mln as of August 1, 2008 Sales breakdown, 2007 Product portfolio of over 400 drugs (Rx, OTC, traditional, adhesives) OTC Рipeline of 71 Rx and 1 OTC, including 12 drugs to be launched in 2008 Over 3,200 employees Traditional 14 % 60 % 18 % Annual capacity of: Adhesive bandages 53 mln packs of tablets/capsules 46 mln packs of ampoules 291 mln packs of bandages Source: Company 19 mln packs of vials (1) according to CMR Pharmexpert $ mln CAGR = 33% Net sales EBITDA Net Income % Rx

18 PRODUCT SEGMENTS Veropharm has a wide portfolio of generic drugs, most of which are positioned in high-growth, high-margin pharmaceutical groups Rx Prescription products OTC products Segment attractiveness ОТС Traditional Adhesives Wide portfolio of generics Target professionals and opinion makers Actively promoted Sales through hospital, pharmacy and reimbursement channels All products are individually branded Actively promoted Sales through pharmacy channel Competitive advantage Business Unit Product groups Hospital sales Rx Pharmacy sales Rx and OTC Traditional products Traditional products Traditional products Old generics, many declining Wide range of products No investment in promotion Sales through hospital, pharmacy and reimbursement channels Adhesive bandages Full product line Both branded and unbranded products Actively promoted Sales primarily through pharmacy channel Adhesive bandages Adhesive bandages 18 18

19 EARLY LEARNING CENTER (ELC) Chain of children toy shops, franchised from UK retailer ELC, based in UK, is one of the largest children toy retailers in Europe 10 stores are currently operating in Moscow and Zelenograd; planned to increase up to 20 by 2009 Adjacent to pharmacy retail market segment Exclusive child s play assortment for pharmacies Own logistics and import operations Planned openings of ELC stores 25 up to Jan 1, 2006 Jul 1, 2007 Jan 1, 2008F Jan 1, 2009F Source: Company 19 19

20 IV. Strategy 20

21 STRATEGY Focus on retail, use non-core businesses as a funding source Maintain and strengthen leading position on the Russian health and beauty market Achieve >15% market share within 5 years Assure profitable growth of the company 21 21

22 STRATEGY and beyond Improve the operational efficiency Expand our services and capabilities Regional expansion and consolidation of the market Cut in G&A costs Leverage the economies of scale and focus on centralized procurement Optimize operational platform: Implementation of modern IT solutions Active integration and rebranding of existing stores Optimization of the assortment plan Better manage out-of-stock situations Effective use of pricing strategies Break-even retail EBITDA in 2008 Offer unique customer proposition: Grow the private label line CRM programs («Malina») Launch of new exclusive brands and products Beauty laboratories «Aromatherapies» centers Improvement of the customer service and qualification of the personnel Leverage our strong brand to attract new customers and build brand loyalty Strengthen our position in existing markets Increase market share thru: 2008 predominantly organic growth aggressive investment utilizing M&A for new regions and organic growth in the regions of strong presence Selective, financially driven approach to new locations for organic openings and target acquisitions 22 22

23 V. Selected Financials Please note: reporting under IFRS since 2002 auditor Deloitte 23

24 INCOME STATEMENT CONSOLIDATED / REVENUE % GROSS PROFIT % EBITDA -7.0 n/a % 4.8% 7.6% 8.8% 9.2% 12.7% OPERATING INCOME n/a SALE OF INVESTMENTS NET INCOME n/a % 6.5% 2.7% 0.3% 0.7% 2.8% in 24 USD mln. 24

25 INCOME STATEMENT CONSOLIDATED & SEGMENTED Noncore 2007 Retail VERO EMC Corp REVENUE GROSS PROFIT % 25.4% 62.2% 49.0% 22% EBITDA % -7.2% 30.5% 22.5% -1.0% n/a OPERATING INCOME NET INCOME % -10.6% 19.9% 10.4% 2.27% n/a in 25 USD mln. 25

26 BALANCE SHEET CONSOLIDATED NON CURRENT ASSETS CURRENT ASSETS TOTAL ASSETS EQUITY TOTAL DEBT CURRENT LIABILITIES* OTHERS TOTAL LIABILITIES * Current Liabilities are non-interest bearing liabilities in USD mln. 26

27 CASH FLOW CONSOLIDATED PROFIT BEFORE TAX PROFIT BEFORE WORKING CAPITAL CHANGES NET CASH IN OPERATING ACTIVITIES NET CASH IN INVESTMENT ACTIVITIES NET CASH FROM FINANCIAL ACTIVITIES NET CASH in 27 USD mln. 27

28 INCOME STATEMENT RETAIL / REVENUE % GROSS PROFIT % % 29.1% 33.1% 33.8% 32.1% 33% EBITDA n/a % -0.3% 1.4% 4.8% 2.2% 4.4% OPERATING INCOME n/a in 28 USD mln. 28

29 BALANCE SHEET RETAIL NON CURRENT ASSETS CURRENT ASSETS TOTAL ASSETS LONG-TERM LIABILITIES CURRENT LIABILITIES in 29 USD mln. 29

30 INCOME STATEMENT VEROPHARM / REVENUE % GROSS PROFIT % % 59.8% 59.2% 54.5% 59.2% 53.3% EBITDA % % 29.1% 31.6% 29.7% 29.7% 30.9% OPERATING INCOME % in 30 USD mln. 30

31 BALANCE SHEET VEROPHARM NON CURRENT ASSETS CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES in 31 USD mln. 31